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Rare to see S&P earnings yields go far below cash yields.
Bill Gurley ’s September 2023 talk “2,851 Miles. ” is a very interesting read on this very important topic in economics and investing. As a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” I like to say, “Regulation is the friend of the incumbent.”
The popularity of buybacks is rising everywhere.
Source: Schroders.
Interesting chart showing that ISM moves in 43 month cycles.
We are close to a bottom.
Mandated by the SEC earlier this year, these new rules are coming in-force in Q4 2023.
Good FT podcast discussing these rules and more.
h/t Conch .
Positioning, especially among discretionary investors, is down sharply.
The staggering rise over the decades in the proportion of firms that are unprofitable.
Despite the sharp rise in Fed Funds rate, company net interest payments have actually fallen.
“We have concluded that a sizeable proportion of huge, fixed-rate borrowings during 2020/21 still survives on company balance sheets in variable rate deposits. Companies have effectively played the yield curve in reverse and become net beneficiaries of higher rates, adding 5% to profits over the last year instead of deducting 10%+ from profits as usual. ”
Source: Soc Gen (via themarketear).
PMI has been falling for well over a year now.
In the first stage, this took down cyclical stocks (measured by the GS cyclical/defensive ratio).
However, the latter has recently bounced and is near a 12m relative high.
This is an interesting setup.
Source: Redburn.
FTSE 250 is seen as a gauge of domestic UK stocks while the FTSE 100 is full of international exposure (e.g. oil, mining etc).
The relative looks like it is bouncing off the Brexit lows.
Source: Redburn.
U.K. is not far behind Japan in the percentage of companies trading below book value.
Will the London Stock Exchange be writing letters soon ?
Looks like a step change – should be positive for active management.
Source: Blackrock.
This chart “shows the average annualized outperformance of stocks after they’ve become one of the largest top 10 in the S&P 500.”
“As you can see, the top 10 largest companies underperform by an average of -1.5% over the subsequent 10 years.”
Source .
Has been on a bit of a tear recently (TOPIX +19%).
It really is a stand-out market – 53% of companies trade below book value.
Change is afoot – Tokyo stock exchange sent letters to all of these urging them to set concrete plans to reverse this valuation.
Source: Schroders .
Chart decomposing the outperformance of MSCI US vs. MSCI EU from 2010 until last year.
Source .
After a recent rally, the discount is back to its post-2011 average.
A nice set of six charts showing how cheap the UK is.
The UK trades at a near-record 40% forward P/E discount to the US and 20% vs the EU.
Almost every industry, as seen in the chart, is cheaper than the US.
A topic Snippet has covered a few times.
For example – (1) how to adjust valuation for intangible assets (here ) and (2) why some people confound their importance (here ).
This is a great webcast with Michael Mauboussin and Kai Wu on the topic – (requires sign-up; grab a free two-week trial here ).
Rare to see this level of positive surprises when a recession is expected.
Source: themarketear.com .
“Demand downturn” overtook “cost cutting” as a key reason for layoffs.
h/t DailyShot .
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